This guide offers information and resources to promote successful management and board exercise of “fiduciary” responsibility for a community action agency.
This publication was created by Meliora Partners, Inc. in the performance of the U.S. Department of Health and Human Services, Administration for Children and Families, Office of Community Services Grant Number 90ET0430. Any opinion, findings, conclusions, or recommendations expressed in this material are those of the author(s) and do not necessarily reflect the views of the U.S. Department of Health and Human Services, Administration for Children and Families.
The examples of policies and procedures, worksheets, and management tools are offered as illustrations of the range of possible approaches. Neither Meliora Partners nor the Office of Community Services endorses any of the examples. Readers should consult relevant legal, financial and/or human resources professionals on any policies and procedures they are considering adopting or updating.
Mastering Community Action Financial Management and Administrative Governance
The governing board and organizational managers are responsible for stewardship of the community action agency’s assets and resources and for the application of those assets and resources to the organization’s mission. Meliora Partners, Inc. has created this online guide offering information and resources to help community action agencies institute essential financial management and governance practices.
The guide consists of eight units:
Unit 1: External Rules - Whether a CSBG grantee organization is a nonprofit corporation or an entity within city or county government, a community action agency (CAA) has to “play by the rules.” These rules are the strings that are attached to public funds, tax-exempt or governmental status, and nonprofit incorporation. Some of the rules by which a community action agency must play have been created by external entities—local, state or federal government, foundations, community funds or individual and business donors. Additionally, a CAA must also establish several internal rules to structure its operations, which will be explored in Unit 2.
Unit 2: Internal Rules - A community action agency must use the funds given to it according to the rules established by the parties which furnish the funds. Whether a public or a private entity, a community action agency must create several internal rules that define how it will be organized and how it will carry out its business. This unit identifies these internal rules and explains their importance in the management and governance of the organization.
Unit 3: Financial Planning - Financial management goes far beyond keeping track of income and expenses and administering internal controls. The strength of its finances plays a critical role in an organization’s ability to carry out its mission and achieve its goals. Achieving and maintaining financial health requires planning and consideration of the “big picture.” This section of the Guide addresses several financial planning building blocks, including mission and strategy, management of risks and changes, development of staff and partners, and preservation of the organization’s resources.
Unit 4: Budgeting - A well-designed budget is a critical financial management tool for any business, and is especially important for nonprofit organizations. The budget provides a financial expression of an organization’s plan for effectively using resources to achieve its goals. Creating a balanced budget is an iterative process. Iteration is a process of achieving a desired result by repeating a sequence of steps and successively getting closer to that result. As additional information becomes available, budgeting steps often need to be repeated to get closer to “balance.” This section of the Guide addresses the budgeting cycle and various aspects of budget development, such as: forecasting revenue, contemplation of the major expense categories, and bringing all the pieces together into an agency-wide perspective.
Unit 5: Day-to-Day Financial Management - Timely, accurate, and complete day-to-day financial management is one of the foundational building blocks of organizational health. In the private sector, the consequences of inadequate financial management come out of the pocket of the owner(s). Inadequate management of public social service funds or private charitable donations reduces the potential for increased well-being of the persons to whom the resources were targeted. Community action agency employee and board members share a “fiduciary” responsibility to produce the maximum possible good for low income people and communities.
Unit 6: Audits - Audits serve useful accountability and performance measurement purposes for the funders, board, management, contributors and other stakeholders of a CAA. This section of the Guide describes the roles and responsibilities for the annual audit, auditor selection, audit preparation and fieldwork, the audit report, and following up with corrective actions.
Unit 7: Board Responsibility for Financial Management - The CSBG authorizing legislation states that an effective board of a community action agency “fully participates in the development, planning, implementation, and evaluation of the program to serve low-income communities.” (676B(a)((2) In this Unit, that responsibility will be explored through two slightly different lenses, similar to 3-D glasses. The paired lenses are: Fiduciary “Duties,” and “Functional Activities.”
Unit 8: Technology for Financial Management - “Keeping the books” no longer characterizes the processes of documenting the transactions and reporting the financial conditions of an organization. Nowadays “the books” are electronic files that contain, classify, allocate, and archive the whole range of financial activity. Savvy financial directors must be nearly as conversant with networks, security protocols, firewalls, servers and clouds and software modules as they are with debits and credits, payables and receivables, check registers and inventory cards. This unit explores issues of importance in creating and maintaining an effective electronic accounting system.
The Office of Community Services (Administration for Children and Families (DHHS) funded two technical assistance projects for fiscal years 2011 and 2012 to help CSBG-eligible entities build their capacity to understand, manage, and address fiscal and administrative issues and enhance their ability to implement innovative service approaches and models that have been successful in addressing specific community needs related to the reduction of poverty, the revitalization of low-income communities, and the empowerment of low-income families and individuals in rural and urban areas to become fully self-sufficient.